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spk20: Ladies and gentlemen, and welcome to the Exelixis First Quarter 2023 Financial Results Conference Call. My name is Tawanda, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations. You may proceed.
spk19: Thank you, Tawanda, and thank you all for joining us for the Exelixis First Quarter 2023 Financial Results Conference Call. Joining me on today's call are Mike Morrissey, our President and CEO, Chris Senner, our Chief Financial Officer, TJ Haley, our Executive Vice President of Commercials, Dana Aftab, our Chief Scientific Officer, and Vicki Goodman, our Chief Medical Officer, who will review our progress for the first quarter 2023 and then March 31st, 2023. During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles. Please refer to today's press release, which is posted on our website, for an explanation of our reasons for using such non-GAAP measures, as well as tables deriving these measures from our GAAP results. During the course of this presentation, we will be making forward-looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding discovery, product development, regulatory, commercial, financial, and strategic matters. Actual events or results could, of course, differ materially. We refer you to the documents we file from time to time with the SEC, which under the heading Risk Factors, identify important features and factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including without limitation, risks and uncertainties related to product commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners, and the level of cost associated with discovery, product development, business development, and commercialization activities. And with that, I will turn the call over to Mike.
spk11: All right, thank you, Susan, and thanks to everyone for joining us on the call today. XOX has had a strong first quarter across all components of our business. Cabo Medics maintained its status as the leading TKI for RCC, in both the first-line IOTKI market and the second-line monotherapy segment. We're advancing our discovery and development priorities to build the ExoAxis product portfolio in a disciplined and thoughtful manner. I know it's a statement of the obvious, but I want to repeat it here. We're in the R&D business. The only way we drive growth for shareholders is to improve standard of care for patients with cancer. It's impossible to disconnect the two. The more patients we help, the more value we create. Our singular focus in R&D is to advance a pipeline of clinically and commercially differentiated medicines for large populations of cancer patients with high unmet medical needs. We estimate ComboMedics is used by tens of thousands of patients annually, and we seek to help many multiples of that number with the pipeline we're building today. Our success with combo isn't the end game, it's just the beginning. We are biology-centric and modality agnostic for biologics and small molecules within a neuro-therapeutic framework in oncology. We're disciplined in our integrated strategy spanning discovery, development, and commercial, and focus on advancing drugs that will move the needle for cancer patients in meaningful indications to build value for shareholders. Molecules that look only modestly interesting or aren't compelling from a commercial perspective never make it out of the gate. Our R&D strategy includes targets and compounds we advance, and as important, those we exclude and overtly choose not to pursue for scientific, clinical, competitive, and commercial reasons. The success of our integrated strategy bridging R&D with commercial relative to our mid-sized biotech peers is highlighted by the historical data on biotech oncology launches since 2016. Of approximately 35 launches in this timeframe, with drugs addressing many of the hottest targets in oncology, the mean and median 2022 global net product revenues were approximately $200 million and approximately $150 million, respectively, compared with the 2022 global net product revenue number for Cabo Medics of $1.9 billion. We picked the winner while avoiding less productive avenues in the past and have the insights and discipline to do so repeatedly in the future. With that, please see our press release issued an hour ago for our first quarter financial results and an extensive list of key corporate milestones achieved in the quarter. And I'll now turn the call over to Chris. Thanks, Mike.
spk09: For the first quarter of 2023, the company reported total revenues of approximately $409 million, which included Cobb's Antidote franchise net product revenues of $363.4 million, Cobb Medics net product revenues for $361.8 million, and included approximately $19 million in clinical trial sales. Growth to net for the Cobb's Antidote franchise in the first quarter of 2023 was 30.3%, which is higher than the gross net we experienced in the fourth quarter of 2022, but overall in line with our expectations. This increase in gross net deductions in the first quarter of 2023 primarily related to higher Medicare Part D and PHS expenses. Historically, we have experienced higher Medicare Part D expenses in the first quarter of the year due to many Part D patients moving through the donor hall at the start of the calendar year. Our ComboMedics trade inventory decreased by approximately 900 units when compared to the fourth quarter of 2022, to approximately 2.1 weeks on hand. As I mentioned on our fourth quarter earnings conference call, we experienced the trade inventory bills in the fourth quarter of 2022, approximately 750 units, as well as we observed most of that Q4 trade inventory bills drawn down the first few weeks of 2023. Total revenues also included approximately $45 million in collaboration revenues, including approximately $33 million of royalties earned from Ipsen and Decatur on their sales of Cabo Santana. As a reminder, clinical trial sales have historically been choppy between quarters, and we expect this to continue in future quarters. Our total operating expenses for the first quarter of 2023 were approximately $380 million compared to $472 million in the fourth quarter of 2022. The decrease in total operating expenses sequentially was primarily driven by lower R&D expense in the first quarter of 2023. Provision for income taxes for the first quarter of 2023 was approximately $8.3 million, compared to a benefit for income taxes of approximately $1.3 million for the fourth quarter of 2022. The company reported non-GAAP net income of approximately $40 million, or 12 cents per share, on a fully diluted basis for the first quarter of 2023. The company also reported non-GAAP net income of approximately $52.8 million, or 16 cents per share, on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $13 million of stock-based compensation expense net of the related income tax effect. Cash and investments for the quarter ended March 31, 2023, with approximately $2.1 billion. This level of cash and investments, supported by our ongoing cash flow from operations, provides excellence with the flexibility to invest in internal discovery activities, to pursue external business development opportunities to expand our pipeline, and allows us to return capital to our shareholders through the $550 million share repurchase program we announced in March of this year. And finally, we are reiterating our full year 2023 financial guidance, which is detailed on slide 14 of our earnings presentation. I'll now turn the call over to PJ.
spk08: Thanks, Chris. The first quarter of 2023 was a strong quarter for Cabo Zantini. The team continues to execute at a high level, which has resulted in Cabo Medics continuing to be the number one prescribed TKI in RCC and second-line HCC. Importantly, CaboMedix in combination with nivolumab is the number one TKI plus IO combination in first-line renal cell carcinoma. Furthermore, the checkmate 9ER 44-month long-term follow-up data presented at ASCO-GU is resonating with prescribers and strengthening the position of CaboMedix plus nivolumab in first-line RCC. Physicians find the 49.5-month median overall survival of CaboMedix plus nivolumab to be compelling. In terms of the business, CaboMedix TRX volume grew 12% year-over-year in Q1 2023 relative to Q1 2022. Looking at the TKI market basket of CaboMedix and LIDA, Sutton, Votrien, and Lumbima, TRX volume in Q1 2023 was stable relative to Q4 2022. TRX volume for CaboMedics was also stable in this time period. Additionally, new patient starts and demand remained strong in the first quarter. CaboMedics continued to perform well in Q1 from both a marketplace and competitive perspective. CaboMedics again led the TKI market basket in TRX share at 39%. As we have discussed previously, the first-line RCC market is extremely competitive, and we are pleased with the performance of CaboMedics in combination with Nivolumab in this setting. Q1 was the second full quarter in which CaboMedics plus Nivolumab was the number one prescribed TKI plus IO combination in first-line RCC. Uptake in the first-line RCC setting is broad across clinical risk groups and practice settings. Importantly, prescriber experience to date continues to be positive, and physicians report that it is consistent with the balance of efficacy, safety, and quality of life seen in the Checkmate 90-R data. Long-term, 44-month follow-up data from the 9ER study was presented at ASCO-GU in February. The median overall survival for the CaboMedix plus nivolumab arm is 49.5 months, representing an improvement of 14 months over the comparator arm, Synitinib. These data are compelling to prescribers and are viewed as clinically meaningful, and the feedback on the data has been extremely positive. Physicians believe that the data support their experience of using the combination in terms of efficacy, safety, tolerability, and quality of life. Prescribers believe that this balance of data and low discontinuation rate of CaboMedix plus Novolumab enable patients to stay on therapy longer to achieve these results. We are pleased with the positive prescriber feedback on the 44-month 9ER data. These data reinforce the leadership position that Cabo Medics has in the marketplace as the number one prescribed TKI plus IO in first-line RCC. We believe these data position Cabo Medics for continued momentum and growth as our entire team works every day to ensure appropriate patients have the opportunity to benefit from Cabo. And with that, I'll turn the call over to Dana.
spk10: All right, thanks, PJ. Okay, so Peter Lamb has discussed the pipeline in depth a number of times previously, so I'm not going to reiterate that today, but instead I'll touch on some of the key features that underlie the pipeline. Our overall strategy is designed to reduce target biology risk in a number of ways. First, we're not dependent on one mechanism of action or limiting our approach to a single aspect of tumor biology for pipeline success. Instead, we're prioritizing targets based on the strength of the science and their ability to address the complexity of tumor biology. Second, we are not limiting our modality to small molecules. We've now fully enabled both small molecule and biotherapeutics capabilities for our internal discovery efforts. Our small molecule discovery programs are focused primarily on synthetic lethal targets with clear patient selection strategies. And our biotherapeutics programs are focused on antibody drug conjugates, or bispecifics and monoclonals focused primarily on innate immunity. Our clinical and preclinical pipeline takes a best-in-class approach that's informed by prior clinical data or proof of concept from earlier programs. This, in our view, greatly reduces target risk. So here's the pipeline beyond cobizantinib. The two most advanced programs are Zanzalintinib and XB002. Vicky will be discussing these programs in much greater detail, so I'll only summarize the underlying strategies for them here. Both of these programs are built on prior clinical experience with molecules that have the same target profile. ZANSA obviously builds on our experience with Cabozantinib. The target profile is essentially the same, but the pharmacokinetics have been optimized. The aim here is to have an easier-to-manage and potentially more combinable drug to allow us to explore the clinical white space where we have evidence that CAVO is active, but where we have not pursued registrational trials, and to also explore novel combinations in areas where CAVO is already approved. XB002 is our tissue factor-targeting ADC that builds on the known profile of tisotimab-pedosin, or TISDAC, which is approved for cervical cancer. XB002 combines a novel monoclonal antibody against tissue factor with a next-generation linker payload technology that together results in a molecule with reduced risk of bleeding and increased stability of the intact ADC. The next programs I'd like to highlight are our two option agreements with our programs with Cybrexa and Cyrova. These option-type arrangements are a capital-efficient way to access clinical stage assets with a back-end loaded structure where we pay for success. The Cybrexa agreement gives us an option on a novel peptide drug conjugate currently in Phase I. DBX12 is a pH-sensitive peptide conjugated to exotecan, a topoisomerase I inhibitor. This is a novel mechanism of action designed to enhance the delivery of exotecan to tumors. But unlike ADCs, this occurs in a tumor antigen independent fashion. The Siropa agreement gives us an option on a novel monoclonal antibody, ABU1805, which targets SIRP-alpha, the ligand for CD47. SIRP-alpha CD47 is a major myeloid checkpoint, and targeting SIRP-alpha directly overcomes some of the known issues with targeting CD47. These include the large PK sink and potential for anemia due to expression of CD47 on red blood cells. ADU-1805 was carefully designed to target all human alleles of SIRP-alpha to give it best-in-class potential. Finally, in preclinical development, we have several biotherapeutics in the pipeline, both ADCs and bispecifics. XB371 follows on from XB002. It's also a tissue factor targeting ADC. but with the toboisomerase 1 inhibitor payload instead of the microtubule targeting payload on XB002. Tissue factor is expressed on a broad range of solid tumors, so having two different tissue factor targeting ADCs with different payloads allows us to match the tumor type with the mechanism of action of the payload to which the tumor is most likely to respond. XB010 is also a next-generation ADC, but this one targets 5T4, another broadly expressed tumor antigen. XB010 uses Catalan site-specific conjugation and proprietary linker payload technology. The two bispecifics, XB014 and XB628, combine the known pharmacology of PD-L1 inhibition with inhibition of a complementary innate immune checkpoint, either the myeloid CD47 checkpoint or the natural killer cell checkpoint, MKG2A. In addition to these programs, we have multiple programs in discovery at earlier stages of maturity, both small molecules and biotherapeutics, that will provide a source of development compounds and INDs going forward. Having multiple programs enables us to make decisions based on real-time data to only prioritize those with the best potential for advancing successfully through clinical development. In fact, we're on track to deliver several new development compounds this year. which will come from both our small molecule and biotherapeutics programs. Our small molecule team reached critical mass last year when we were able to complete the introduction of several key capabilities, one of which is structural biology, to help guide the optimization of lead compounds. Structural biology was one of the final components needed to get our small molecule discovery organization fully built out, and I'm very pleased to say this group has been highly prolific. Despite being on the job for less than a year, they've already solved over 100 structures. And as you can see in this slide, they've delivered a steady stream of high-resolution structures using both X-ray crystallography and cryogenic electron microscopy. These structures have been very helpful in guiding our medicinal chemistry efforts in our recent discovery program, and in some cases have resulted in significant evolution of weed series for driving potency and selectivity. Using this approach, we've also been able to optimize known liabilities of lead molecules as a way toward achieving best-in-class status for programs with advanced competition. Some of you may remember that in our original discovery platform, we also had a strong structural biology group that solved over 1,000 structures of kinase inhibitor complexes, which helped drive dozens of discovery programs. That group had only x-ray crystallography to generate their structures, but with the introduction of Cryo-EM in this field, we're now able to get these structures faster than ever. So that's it for my remarks, and I'll now turn the call over to Vicki.
spk17: Thanks, Dana. Today, I will provide updates on the progress of our clinical stage pipeline, focusing on our most advanced program, Zandalentinib and XB002, as well as the Cabozantinib registrational trials. XL102 continues in dose escalation, and we are focused on reaching a go-no-go decision later this year. As we continue to refine the strategic approach for each of our pipeline assets, we retain a strong focus on clinical trial execution to rapidly advance our pipeline molecules with the ultimate goal of improving outcomes for cancer patients. I'll begin with zanzalitinib, our next generation tyrosine kinase inhibitor, which entered full development last year. At ESMO last September, we presented data from our dose escalation cohorts of STELLAR-001, which demonstrated that ZANZA has a manageable safety profile with no unexpected toxicities. Additionally, we presented preliminary evidence of activity in renal cell carcinoma, including activity in patients who had previously been exposed to cabozantinib. We have since completed enrollment of an expansion cohort in clear cell RCC patients with 32 patients enrolled at the starting dose of 100 milligrams, and now have preliminary efficacy data for the full cohort. These patients had received multiple prior therapies, including checkpoint combinations, with roughly half having received prior cabozantinib. With a median follow-up of seven months, the overall response rate in the full cohort is 34%. Responses were seen in patients previously treated with cabozantinib, as well as CABO-naive patients, where the overall response rate was 50%. Additionally, there is one unconfirmed PR in the CABO-naive population for whom we are awaiting the results of a confirmatory scan. We also continue to be encouraged by the emerging safety profile. The complete data set, including both efficacy and safety, is planned for submission to an upcoming medical conference likely later this year. These data provide evidence for the activity of zanzalintinib in a CABO-sensitive tumor type and provide additional support for leveraging CABO data to inform the ZANZA development program. We are continuing to enroll additional expansion cohorts in multiple solid tumors across both stellar 001 and 002, as well as on dose escalation cohorts for the combination of ZANZA with Abdullag, the nivolumab-relatilumab combination. Data from these studies will inform future registrational plans for ZANZA, and we look forward to sharing these data as they mature. Turning to our ZANZA Phase III studies, we initiated the first study, STELLAR-303, comparing the combination of ZANZA with apezolizumab versus regorafenib in patients with non-MSI-high, mismatch-repair-proficient, late-line metastatic colorectal cancer, with a primary endpoint of overall survival in the RAS wild-type population. The hypothesis for this trial was based on promising cabozantinib data from two studies in similar settings, COSMIC-021, an Exelixir-sponsored signal detection trial in combination with a tezolizumab, and CAMILA, an investigator-sponsored trial with CABO combined with dervalumab. Response rates in the RAS wild-type metastatic CRC population in these studies were 25% and 50% respectively, suggesting robust activity relative to the current standard of care. Additionally, we announced the opening of Stellar 304 late last year, a Phase III trial comparing the combination of Zanza and nivolumab to sunitinib in patients with certain non-clear cell RCC histologic subtypes who have not previously been treated for metastatic disease. Data to support this trial came from two CAMBO studies, one as monotherapy and the other in combination with nivolumab. In an NCI-sponsored randomized Phase II trial, cabozantinib showed a longer PFS compared to sunitinib in patients with the papillary subtype of non-clear cell RCC, and response rates were 23% for cabo and 4% for sunitinib. Promising activity of cabo in combination with nivolumab was seen in an investigator-sponsored Phase II study where the response rate in patients with non-clear cell RCC was 47.5%. With these two Phase 3s now underway, we are also on track for the initiation of additional Phase 3 trials this year. We have selected the indications for the next two Phase 3 studies and will share details of the trial designs later this year. Moving on to XB002, our first antibody drug conjugate, which targets tissue factor. We believe that this ADC has important areas of potential differentiation versus competitor molecules. First, the antibody was designed to avoid interfering with the coagulation cascade, with resultant potential for lower bleeding risk. Second, the stability of the linker leads to reduction in circulating free payload, which may result in fewer off-target orostatin-related toxicities, including neurotoxicity. We continue to be encouraged by both the PK, which demonstrates low levels of circulating free payload, as well as the emerging safety profile. We are nearing declaration of a recommended dose for monotherapy and look forward to expeditiously enrolling multiple solid tumor expansion cohorts, as well as presenting additional data as they mature. These signal detection cohorts will inform the drug safety and efficacy profile and allow us to pivot quickly into registration-directed trials. Additionally, we continue to enroll on the dose escalation cohorts for the nivolumab and bevacizumab combinations to determine a recommended dose for each combination to carry forward into expansion, and we will continue to seek out other promising combination approaches in sensitive tumor types. For cabozantinib, We look forward to the readout of the progression-free survival primary endpoint for CONTACT-02, our phase three study in combination with the tezolizumab in metastatic castrate-resistant prostate cancer in the second half of this year. We announced in March that CONTACT-03, the phase three trial evaluating cabozantinib in combination with the tezolizumab versus cabozantinib alone in patients with previously treated advanced renal cell carcinoma did not meet the primary endpoint of progression-free survival. And along with our partner and study sponsor, Roche, we look forward to presenting the data at ASCO. Importantly, the CONTACT-03 study provides the largest data set to date on the performance of single-agent cabozantinib in RCC patients who have previously received checkpoint inhibitor-based therapy. In summary, we continue to make progress advancing our pipeline molecules and believe that the emerging data for both zandalitinib and XPOO2 are encouraging. We look forward to sharing the emerging data at upcoming medical conferences as they mature and continuing to expedite the development of these promising assets for the benefit of patients with cancer. And with that, I'll turn the call back over to Mike.
spk11: All right. Thanks, Vicki. As you heard on the call today, the XOX's team is off to a great start in 2023. We're excited to have the momentum from our compost antigen franchise translate to the critical growth drivers across all components of the business as we at ExoLexus work to help many more cancer patients in the future. We expect continued progress across our pipeline in 2023 and look forward to sharing our latest results and plans at an R&D day later in the year. So I'll close by thanking the entire ExoLexus team for their individual and collective efforts to support our range of discovery, development, and commercial activities. The team is highly motivated to achieve our mission to help cancer patients recover stronger and live longer. We drive for results every single day as we remain nimble and innovative across all components of the business and build on a culture of engagement and collaboration. We look forward to updating you on our progress in the future. Thank you for your continued support and interest in Exalexis, and we're now happy Open the call for questions.
spk20: Thank you. Ladies and gentlemen, to ask the question, please press star 1-1 on your telephone. You will then hear an automated message advising your hand has been raised. And then wait for your name to be announced. To withdraw your question, please press star 1-1 again. To allow for everyone to get their questions answered, we will take a maximum of one question per person. Once you've asked your questions, you are welcome to get back in the queue to ask a follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Astika Gomwardhani with Truist. Your line is open.
spk18: Well, yes. I was just wondering about Zanzalantneb. Lastly, you presented the first clinical data for an asthma. This year, it seems like the submission deadline for abstracts for asthma 2023 is tomorrow. So, can you tell us if you submitted an abstract or an update to the ZANZA combo phase 1 dose expansion to asthma, or do you plan to do so before the deadline tomorrow? Thanks. And this has been Inan Chan for OSTICA.
spk11: All right. Thank you. Vicky, you want to take that one?
spk17: Sure. So, as I mentioned, we've now enrolled the full cohort. We have adequate follow-up in that Clear Cell RCC cohort in order to report out response rates. And we do look forward to presenting these data at an upcoming medical conference, hopefully later this year. I'm not going to comment further at this point on which conference that is, but we, you know, again, I thank have now a robust data set to be able to present and look forward to sharing these results in more detail in the future.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Michael Schmidt with Guggenheim. Your line is open.
spk13: Hey, this is Paul. I'm for Michael. Thanks for taking our question. Our questions on the phase 1 study for XP002, so especially on the cohort expansion, are you planning to prioritize any tumor types where you've seen early clinical activity from that initial readout? And does moving that program into full development sort of suggest potentially one or more phase 2 initiations in the near term? And then just on that as well, you've also added a tumor agnostic cohort to the trial. So, I'm wondering just if you could talk about the enrollment criteria for that and sort of plans for a tumor agnostic path. Thank you.
spk05: Vicky, go ahead.
spk17: Yeah. So, in terms of XBO2, As I mentioned, we are nearing a dose to carry forward into expansion cohorts. We're looking forward to very quickly pivoting into those expansion cohorts, rapidly enrolling them, looking for signals. I think when we determine a signal that we're able to move forward with, that will be the pivot into full development. In terms of You know, tumor types, obviously, we enrolled a very broad variety of tumor types in dose escalation, and so expansion is really going to be focused on determining signals in discrete populations. Of course, it will be informed, you know, by a competitor molecule and the profile that they've seen, but we are very encouraged by the data and the competitive profile, and so we think that, you know, we have a great opportunity here to be a best-in-class molecule. I would say with respect to the tumor agnostic, this is really an opportunity for us to look for evidence of activity perhaps in less common tumor types that do express tissue factor and get a better understanding of the potential impact of tissue factor expression on response rate.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Andy Shea with Wimbley. Your line is open.
spk14: Great. Thanks for taking my question. So, you highlighted in the prepared remarks and PR about contact O3 and ASCO, and I'm just wondering about the kind of potential read-through, especially the non-clear cell populations to stellar 304. And maybe if you don't mind, I can squeeze a quick one. About cryo-EM and X-ray crystallography, these capabilities, from a philosophical perspective, R&D philosophical perspective, does that allow you to expand beyond trying to find a binding package like TKI into something that is more, you know, unique, like an allosteric inhibitor. Thanks for taking my questions.
spk11: Andy, it's Mike. Yeah, thanks for your questions. Well, why don't we start with that last one with Dana, and then we'll go back to Vicky for contact 03. Dana, go ahead.
spk10: Sure. Yeah, that was a great question. And in fact, Yes, indeed. Getting those structures, especially getting them so quickly, gives us an opportunity to go for non-orthosteric binding approaches. So we are actually doing that with some programs right now. So the data coming in from those structural studies and coming in so quickly with such high resolution has really enabled some fantastic progress in drug discovery, honestly, that we haven't been able to see in a long time, so we're really excited about it. Vicky?
spk17: Yeah, so with respect to CONTACT-03, I think it's important to keep in mind this study looked at patients with previously treated RCC across both clear cell and non-clear cell. These patients had already all received, you know, prior IO in addition potentially to, you know, to TKIs. So that's been proven thus far to be a very difficult area for drug development. I will point out that, again, I think the CABO control arm will be interesting to look at in terms of the performance there versus what we've seen historically. And if we go back and think about CABO development in a later line of therapy, Going back to Meteor, where we saw a response rate of about 20% in PFS of about seven and a half months, to then Cantata, where again, CABA was a control arm in a phase three. In that case, that second case, some but not all patients had received prior checkpoint inhibitors, and the median PFS was about 9.3 months. So compared to a checkpoint-naive population, it does seem that you know, there has been some improvement in CABO performance in that second line. So, I would recommend taking a look at the CONTACT03 data, you know, closely in terms of CABO performance. In terms of the stellar, you know, 304, this is a first-line population. I outlined in my prepared remarks, you know, the basis, the reason to believe here in terms of the prior CABO data, which has shown activity in non-clear cell RCC. We do have confidence that the activity we're seeing with ZANZA in terms of RCC, you know, in a sensitive tumor type similar to CABO, you know, gives us confidence in the design of Stellar 304.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Chai Fong with Bank of America. Your line is open.
spk12: Oh, hey, this is Chief. I'm Jason from Bank of America. Thanks for taking our questions. Maybe just one for me on early pipeline. Interesting you have highlighted small molecule focus on synthetic lethality. I think in the past when we have, you know, spoke about pipeline, companies more focused on antibody, biologic therapies, and less so on small molecule. and also less so on targeted oncology. So I'm curious if, you know, if I misunderstand synthetic lethality inappropriately, that you're not looking at anything in terms of targeted oncology, and if there's a change in messaging on how the company thinks about early pipeline development compared to the past. Thank you.
spk10: That's a great question. So synthetic lethal approaches are really a way to understand more completely how tractable a target is in a specific population of patients. We like the approach, as do many others, because it essentially comes along with an automatic patient selection strategy. So you can liken this to cabozantinib in VHL defective tumors. VHL defects create a form of synthetic lethality to these types, to the types of kinase inhibitors that we're developing with copazanthin. There's really no change in our, in our, in our strategy. We just have tools that enable us to get a better handle on patient populations. So, and as Mike mentioned earlier, we really are pursuing a biology-centric modality agnostic approach. So we choose our small molecules versus biotherapeutics based on the target and the biology to allow us to really explore targets that we think will bring the most benefit to patients.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Jay Olson with Oppenheimer. Your line is open.
spk07: Oh, hey, congrats on the progress, and thanks for taking the questions. For Zanza, can you talk about the timeline and that you're prioritizing for the next wave of Phase III programs, and how do you intend to trade off the balance between indications where you've already seen activity for CAGO versus going after new combinations. Thank you.
spk11: Thanks, Jay.
spk17: Vicki, you want to take that one? Yep. So, as I mentioned, we're on track for initiating additional Phase III trials this year. We have picked out, after a process of thinking about areas of unmet need, where we have data, where we believe we can differentiate And also considering, you know, bringing in a novel combination and really the size of the market opportunity. We've decided on two indications. We will make some, give you some updates as far as those indications later this year at the appropriate time. But we're, you know, working through protocol developments in advance of initiating those trials this year.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Gregory Renza with RBC Capital Markets. Your line is open.
spk02: Hi, this is Yvonne for Greg. Thanks for taking our question. Maybe just one on the share repurchase program. Just wondering if that's currently active or was used in the first quarter or April, or do you plan to start utilizing it now after first quarter earnings? Thank you.
spk09: Yeah, so thanks for the question. Yeah, I mean, when we announced the program, we were in a closed trading window, so we haven't been able to purchase shares. But, you know, we continue to be committed to the $550 million share repurchase program we announced in March.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Sylvan Turkin with JMP Securities. Your line is open.
spk15: Thank you very much for taking my question, and congrats on the quarter. Just one question that one after you haven't talked about is the CDK7 inhibitor XL102. Do we still expect data by the end of the year? And could you kind of outline what would lead to a go and no-go decision here? What's the bar that you're looking for? Thank you.
spk11: Yeah, thanks for the question. Vicky, you want to take that? Sure.
spk17: Sure. Yeah. So, as I mentioned, we are focused on dose escalation and making a go-no-go decision later this year. You know, that will be based on the data at the end of the day. So, both the safety profile, evidence of activity, as well as PK and PD data. And in terms of data presentation, again, when we have a robust data set to present, we'll certainly do so as those data are mature.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Akash Tewari with Jefferies. Your line is open.
spk03: Hi, this is Amy for Akash. Thanks for taking our question. So our question is on the R&D spend. I guess, do you have a sense of what level of R&D spend as percentage of revenues? the activist shareholders want you to commit to versus what the management team wants. And additionally, what in general the split, the split is for your R&D spend this year. That's for trials for cattle and trials for next-gen cattle and tissue factor ADC and everything else. Thanks.
spk11: Thanks for the question. There's a lot there. Really don't want to get into the details about the R&D spend. We gave guidance on that at the beginning of the year. We reaffirmed that guidance this year. As you heard in our prepared remarks, we have a very deep and robust R&D pipeline that's focused on improving standard of care for patients. That budget and all aspects of the efforts here at Excellesis are obviously reviewed by the board. and a very robust discussion that will continue as we go forward. And we're excited to be moving forward with the plans and the data that we've talked about today and will in the future. Thank you.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Yaron Warbur with Coleman. Your line is open.
spk04: Great. Thanks for taking my question. A couple sort of interrelated questions. Maybe the first one, just give us a little bit of a sense. I mean, you have a fairly extensive pipeline now looking from phase three, you know, all the way to preclinical. Are you still, do you have room to bring in more compounds or is it going to be mostly sort of advancing what you have now and pushing the preclinical programs into the clinic? And then secondly, just any comments you can make relating to your decision two days ago not to nominate an additional board member or that ended some of the proxy battles for the time being. Thank you.
spk11: Yeah, you're going to Mike. Thanks for the question. In regard to the first question, you know, we are focused on prioritizing the best assets with the best data and the conviction that we have behind that in terms of how we invest in moving molecules forward. Internally versus externally, small molecules versus biologics. You know, obviously, we've got... Traffic was a success there, which led to us focusing on Cabo back in the day and the success that led to that in terms of the broad label and, again, the, you know, approximate $1.9 billion in global revenue that we had last year. So we know how to be disciplined. We know how to prioritize. That requires data and a sense of the commercial opportunity and the competition and all the different factors that drive into that. And that obviously will continue going forward. We're always looking for good assets on the outside that will continue. We have a very high bar for partnering and or acquiring assets. As you know, our scientific conviction is much more prescient and much more critical to us in the short term in terms of the value equation, in terms of where things are trading a year ago versus now. We have to have conviction in assets externally or internally. to get behind them with the financial muscle that we've got and certainly the expertise in development as well as commercial. So it's all about conviction and probability of success and our view on how that looks. So that will continue. You know, we're on the lookout for good drugs. And certainly, as Dana mentioned, we like deals like Cybrexa and Zerola because those are back-end loaded. We pay for success. And if we see more of those, you know, in the near term, then, you know, our plan is to be able to transact there to, again, build value for patients and shareholders. In terms of your other question, I'll refer you back to the press release we had on Sunday. I don't want to go beyond that. We have an open spot on the board. We've agreed to not, amongst ourselves as a company and as a board, to not contest the election. And we're moving forward. So that's that.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Michael King with EF Hutton. Your line is open.
spk06: Thanks for taking the questions, guys. I'm not sure you want to get into this level of detail, but I had some questions on the spend. In the first quarter, you guys exceeded the street consensus by about $20 million. And if you use the level in the first quarter as the base and grow it modestly to the end of the year, you're above the high end of your spend guidance, which suggests that you're going to have to dial down the growth in spending on SG&A. And then on R&D spend, in the past you've had a pretty big bolus in the fourth quarter. I'm just wondering from maybe an order of magnitude basis if that kind of increase over the Three previous quarters is going to moderate a bit because, again, you'll come in over the high end of your spend. So just want to see if I can get some color on that.
spk09: Yeah, Chris, go ahead. Yeah, Mike. So I guess a couple of things there from an R&D spend perspective. You know, last quarter we had about $100 million or more of licensing expenses that came into play during the fourth quarter. We had significantly less than that in the first quarter year. If you look at the annualization of our first quarter spend, it's slightly below our current R&D guidance from an R&D perspective, but we still feel confident in where we are there. And then from an SG&A perspective, we did have some one-time things, which I won't go into, but even at 131, annualized VAT, that's at the 549 range, so we're still kind of at the lower end of the guidance, so, or within the guidance. And we did have some one-time things during the quarter, which, you know, as one-time things, they don't repeat themselves.
spk05: So, we still feel confident in the guidance that we have.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Chris Chabutainy with Goldman Sachs. Your line is open.
spk16: Great. Thank you very much. Mike, you've had such a significant tenure in the industry and certainly have been generating much by shepherding, particularly Cabo, through challenges of becoming a leading product in the oncology space. As you bring to bear your experience and think about the future, I think a lot of investors in therapeutics think about now and to the back end of the decade where there will be certain pressure points like the IRA and whatnot and the differences with small molecules. And thinking about how to design the strategy to sort of sustain that kind of leadership, I think one of the things that I'd be curious to understand is how you think about, you know, in particular the voices that could be important to you with a board. There is that one opening seat and there were public salvos that went back and forth in terms of the right constituencies and what kind of activity and voices, et cetera. What is your vision for What kind of sort of complementary skill sets and experiences would make sense for your board to help best guide the company to continue to go forth as challenges just continue to be, you know, very competitive external dynamics through the back end of the decade? And again, just, you know, speaking to the wealth of experience that you've had would be very eager to sort of get a sense for what your vision is there. Thank you.
spk11: Thanks for that. I'm not exactly sure what the question was, but let me speak to what I think you're asking. Again, as I just mentioned or talked about in the context of, I think, the question from your own, the proxy issues are, from our point of view, as we talked about on the press release on Sunday, we're not going to contest the election as it's currently envisioned, so You know, what will happen will happen. We have a very strong board. I expect we're going to have a strong board going forward. You know, we have a very good process within the company and the dialogue that we have with the board, the dialogue, the discussions, the debates, the arguments that I think are healthy from the standpoint of really refining and optimizing our chance of success as a company as we, again, seek to build shareholder value by helping more patients with cancer. Again, as I mentioned in my prepared remarks, those two goals, those two topics have to travel together. That's the business that we're in. Again, we're really excited about our future. We have, as you heard from Vicki today with Zanza, strong momentum with that program, XP002, is one step behind that in terms of entering expansion cohorts very quickly. The wealth of opportunities we have from internal sources, from external sources is strong. And by the fact that going back to as early as 2015, we built a company to actually run like a business from the standpoint of generating free cash flow and using that to fund our ability to drive top line growth through pipeline advancement. So we're really excited about where we're at. We're looking forward. We've got a lot of opportunities. The team is very strong and has very good morale right now, and we're looking forward to doing well by shareholders while we help patients with cancer on a much broader basis than we have in the past.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Peter Lawson with Barclays. Your line is open.
spk01: Great. Thanks for taking my question. Chris, just as we think about the underlying script growth, any guidance there and expectations for the level of discounts, allowances, and how that trends through the rest of the year?
spk09: Thanks for the question. So, you know, we did see around 30% gross to net in the first quarter. Like I said in the prepared remarks, we did see higher Medicare Part D, you know, patients are going through the donor hall and also PHS expenses. You know, when I talked at the fourth quarter call back in February, I was thinking that the year is going to be in the 31% range for gross to net, and we still feel like that's the appropriate range for right now, but it's still early in the year.
spk05: So that's where we are from a gross to net perspective.
spk20: Thank you. Please stand by for our next question. Our next question comes from the line of Steven Wiley with Stifel. Your line is open.
spk21: Yeah, thanks for taking the questions. So, just on stellar 303 and colorectal, I don't think there's been much in the way of clinical benefit demonstrated in patients with liver mets. with any IL regimen. And I think both the Phase IIs you referenced had a pretty high incidence rate of liver mets, I think somewhere around 80%. So, I guess I'm just curious what you think the inclusion of Atezo is adding in this liver met patient population. Thanks.
spk17: Vicky? Yeah, sure. So, you know, I think coming back to Stellar 303, this is a Phase III study looking at the combination of Zanza with atezolizumab versus regorafenib in late-line colorectal cancer patients, right? I think these patients have very limited treatment options. The rationale, as I said, is supported by two essentially Phase II kind of single-arm trials One was a cohort on COSMIC-021, and the other was an IST, right? And they were very similar patient populations in terms of this sort of late line, previously heavy treated. As you mentioned, liver mets are very common in colorectal cancer, so they were certainly represented in both of these trials. Given that they're single-arm trials, you know, I would say that what we're seeing, however, is that there's a clear signal of response rates outside of what we would expect from traditional standard of care on the order of 50% from the Camilla IST and 25%. Now, that's in the overall population, of course. We do believe it is the combination, you know, based on other data looking at contribution of components. You know, obviously, that'll be something that we have to address. with the regulatory agencies at the time we file should the trial be successful, but we do feel like we are well positioned potentially to improve upon the standard of care in this particular high unmet need patient population.
spk20: Thank you. Due to the interest of time, I would now like to turn the call back over to today's host, Susan Hubbard. Ms. Hubbard?
spk19: Yeah, thank you, Tawanda. Thank you all for joining us today. We certainly welcome any follow-up questions you have either by phone or over email, and we'll be happy to get back to you. Thanks again.
spk20: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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